The IRS has issued transition relief allowing small businesses in Wisconsin to claim the employer health insurance credit under Code Sec. 45R even though they are unable to offer a qualified health plan (QHP) in 2016 through a Small Business Health Options Program (SHOP) Exchange because there are no QHPs available in the county in which they have their primary business address. Affected Wisconsin counties include Pierce, Polk and St. Croix. Similar relief was provided for 2014 for employers in certain counties in the states of Washington and Wisconsin under Notice 2014-6, and certain counties in Iowa under Notice 2015-08.

For tax years beginning in 2014, the credit is available only with respect to premiums paid by a small employer for a QHP offered by the employer through a SHOP Exchange, the credit is available only for a two-consecutive-year period, and the maximum credit rate is increased to 50 percent from 35 percent for eligible small employers, and to 35 percent from 25 percent for tax-exempt eligible small employers. However, QHPs are unavailable in certain Wisconsin counties for 2016. Therefore, an eligible small employer with a principal business address in one of the affected counties may calculate the credit under Code Sec. 45R by treating health insurance coverage provided for the 2016 health plan year as qualifying for the credit, provided that the coverage would have qualified for a credit under the rules applicable before January 1, 2014. This treatment applies with respect to the coverage provided during the 2016 calendar year and during any portion of a health plan year beginning in 2016 that continues into 2017.

If the eligible small employer claims the Code Sec. 45R credit for the 2016 tax year, then the credit will be calculated at the 50 percent rate (35 percent for tax-exempt eligible small employers) for the entire 2016 taxable year. If the eligible small employer first claims the credit for the 2016 tax year, the 2016 tax year will be the first year of the two-consecutive-tax-year credit period. If the eligible small employer first claims the credit for the 2015 tax year, then the 2016 tax year will be the second year of the two-consecutive-tax-year credit period, regardless of whether the eligible small employer takes advantage of the relief in this notice regarding the credit for coverage provided under the rules applicable before January 1, 2014.